Correlation Between Waste Management and Edison International
Can any of the company-specific risk be diversified away by investing in both Waste Management and Edison International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Waste Management and Edison International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Edison International, you can compare the effects of market volatilities on Waste Management and Edison International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Waste Management with a short position of Edison International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Edison International.
Diversification Opportunities for Waste Management and Edison International
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waste and Edison is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and Waste Management is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Waste Management are associated (or correlated) with Edison International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison International has no effect on the direction of Waste Management i.e., Waste Management and Edison International go up and down completely randomly.
Pair Corralation between Waste Management and Edison International
Assuming the 90 days trading horizon Waste Management is expected to generate 1.11 times more return on investment than Edison International. However, Waste Management is 1.11 times more volatile than Edison International. It trades about 0.33 of its potential returns per unit of risk. Edison International is currently generating about 0.28 per unit of risk. If you would invest 19,802 in Waste Management on August 31, 2024 and sell it today you would earn a total of 1,818 from holding Waste Management or generate 9.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Waste Management vs. Edison International
Performance |
| Timeline |
| Waste Management |
| Edison International |
Waste Management and Edison International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Edison International
The main advantage of trading using opposite Waste Management and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, Edison International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Edison International will offset losses from the drop in Edison International's long position.| Waste Management vs. Tsingtao Brewery | Waste Management vs. NISSIN FOODS HLDGS | Waste Management vs. TYSON FOODS A | Waste Management vs. National Beverage Corp |
| Edison International vs. Waste Management | Edison International vs. Western Copper and | Edison International vs. SERI INDUSTRIAL EO | Edison International vs. Q2M Managementberatung AG |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |